Story Case

During the war with Spain, Signor Amarillo, then living in New York City, made an agreement with Cas-sidy Brothers to deliver to them 500 bales of cotton from his plantation in South Carolina. Cassidy Bros, broke this agreement without assigning any good reason. Amarillo sued them for breach of contract. They defended on the ground that, since Amarillo was a Spaniard not naturalized and since his country was at war with the United States, he was not a competent party and could not make a valid contract.

"Was this defense good?

Ruling Court Case. Harvey Vs. Hobson, Volume 53 Maine Reports, Page 451; Volume 89 American Decisions, Page 705

On July 27,1835, Stephen Neal conveyed land, which he then owned, to Samuel E. Crocker. By various subsequent transfers the property came to Hobson, the defendant in this action. On December 28,1836, Stephen Neal died, leaving his daughter Lydia Dennett, who was the wife of Oliver Dennett, his heiress. On December 1st, 1851, Oliver Dennett died. Soon thereafter, Lydia made claim to the property which her father had conveyed, during his lifetime, to Crocker. She based this claim upon the fact that, at the time her father made the conveyance, he was insane and incapable of making a binding contract or sale; that therefore, this sale was voidable. Since she was the next of kin she had the right and elected to avoid the transaction. She made a conveyance to the plaintiff in this action, Harvey. Harvey then brought this action to recover the land from Hobson, who was now in possession.

Decision

In order to have a binding contract there must be two or more parties to every agreement, and these parties must be competent by law and nature to contract. An insane person, by nature, is regarded as unable to bind himself by a contract. Thus in this case, the transaction, in which the land was sold by Stephen Neal to Crocker, was voidable because at the time Neal was insane. Such a contract may be avoided by him during his lifetime, or by his personal representative after his death. In this case, it was avoided by his daughter and the conveyance made by her to Harvey passed title to him; he is entitled to recover the land of Hobson, the defendant.

Judgment was therefore given for Harvey in this action.

Ruling Law. Story Case Answer

It has been established heretofore that every contract implies the existence of at least two parties. Not even is a contract possible between an individual in one capacity and the same individual in a different capacity. Here it is to be noted that there must not only be two or more parties to a contract, but these two parties must be naturally and legally competent to enter into a binding agreement.

Natural incompetency to contract exists when a person has not sufficient intelligence to be aware when he has no power of consent to his acts. Such a person is an insane person.

Legal incompetency exists when a person is forbidden by law to enter into a contract, even though such person may have sufficient intelligence to do so. At common law, a married woman was never permitted to contract.

Thus there must be two or more parties to every contract, qualified naturally and legally to assume contractual obligations.

In the Story Case, Cassidy Brothers had a good defense. Amarillo was an alien enemy and hence was not a competent party to a contract. It was a case of legal incompetency.